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Steel pipe imports and the impact of trade laws

The trade flows of few steel products have been affected as much by the impact of US trade laws as supply and demand in the market. Since the mid-1980s, virtually every type of steel pipe and most foreign suppliers have been subjected to antidumping (AD) and countervailing duty (CVD) complaints by the US pipe industry. Altogether more than 165 separate trade cases have been filed against carbon and alloy welded and seamless standard and line pipe, pressure pipe and tubing, oil country tubular goods, drill pipe, heavy- and light-walled rectangular tubing, stainless pipe of all sorts, and pipe fittings. The 30 targeted countries span the globe—from Argentina to Canada, India to Japan, Great Britain to the failed state of Yugoslavia, and Israel to South Africa. Today there are 40 active AD and CVD orders in place against pipe products from thirteen countries, and there are rumors in the market about more to come.

Since 2008, China has been the number one target for trade cases against imports of steel pipe—as it has been for other types of steel, chemical, and metal products. Almost 40 percent of all outstanding orders on pipe target China. They cover welded standard and line pipe, OCTG, drill pipe, light-walled rectangular tubing, stainless steel pressure pipe, pipe fittings, and seamless standard, line and pressure pipe. Most of these products are subject to both AD and CVD orders with cumulative margins often exceeding 100 percent and sometimes 200, 300, and even 600 percent!

Obviously, with margins like these, imports of pipe from China have plummeted. For example, Chinese shipments of standard pipe to the United States were in the range of 700,000 tons annually before the trade cases were filed in 2007. AD and CVD orders were issued in July 2008, and by 2009 imports fell to 35,000 tons—a drop of 95 percent. Imports of line pipe from China followed the same pattern, peaking at an annual rate of 500,000 tons in 2008 before falling to less than 45,000 tons after AD and CVD duties were imposed. Perhaps the most dramatic illustration of this phenomenon involves the trade flow of OCTG from China. Imports of OCTG reached a staggering 2 million tons in 2008, but after the US industry filed both AD and CVD petitions in April 2009, shipments fell by more than 98 percent!

Normally, under circumstances like this—where trade cases effectively exclude products from entering the US market—American consumers look to other suppliers, both domestic and foreign, to make up the difference. However, for some pipe products, the choice is constrained because most of the top suppliers to the US market are also subject to AD or CVD orders. In fact, imports of welded standard pipe from Brazil, India, Korea, Mexico, Taiwan, Thailand, and Turkey were already subject to trade actions before China entered the US market. These orders have had a mixed effect on these other countries. Imports of standard pipe from Brazil, for example, have been negligible, while moderate tonnages continue to enter the United States from India, Korea, Mexico, Taiwan, Thailand, and Turkey. In the latter cases, individual foreign producers and exporters have actively participated in annual administrative reviews conducted by the US Department of Commerce (DOC), and a number have achieved low or even zero dumping margins.

Nevertheless, as we have pointed out in previous articles, US importers must take into account the risks involved in entering pipe or any other product which is subject to an AD or CVD order. Because the United States enforces a “retrospective” (or retroactive) system for assessing and collecting dumping and countervailing duties, the deposit rate can change—sometimes substantially—as a result of an administrative review. An importer who paid a 5 percent dumping duty at the time of entry may be informed later that the final assessed dumping duty is 15 percent or 25 percent. If an importer is not affiliated with the foreign producer or exporter, he may find it especially difficult to evaluate the likelihood that his supplier will be able to achieve a favorable margin in an administrative review. Moreover, an independent importer is not in a position to affect the outcome of a review. Yet it is the importer who is solely responsible for the payment of any dumping or countervailing duties that are eventually assessed by US Customs and Border Protection at the conclusion of a review, and as a practical matter, the exporter cannot share the risk of increased dumping duties by agreeing to reimburse the importer part or all of any additional duties that may be assessed.

Returning to the search for standard pipe sources, there remain a number of suppliers that are not covered by AD or CVD orders. Canada is the most prominent, shipping over 200,000 tons to the United States in 2010. Three relative newcomers—Oman, the United Arab Emirates and Vietnam—each exported about 35,000 tons of standard pipe to US customers last year. Although these countries account for only a small fraction of the tonnage of standard pipe that had previously been imported from China, they are under close scrutiny by the American industry. Recently, the chairman of the Vietnam Steel Association reported that US producers had warned the Association of possible trade complaints against allegedly dumped pipe products from Vietnam. Thus, for US purchasers, the uncertainty of dealing with suppliers who are already under AD or CVD orders is compounded by the prospect of new trade actions against standard pipe from more recent entrants into the US market.

The same pattern may be seen for other pipe products. There are AD orders on light-walled rectangular tubing from such traditional sources as Korea, Mexico, Taiwan, and Turkey, which have limited the availability of these products in the marketplace. The exit of China from the market and the effect of AD orders on seamless pipe from Germany, Japan, and Romania contributed to a 67 percent reduction of total imports from 2008 to 2010. Rumors have been flying for more than a year about a potential case against OCTG from Korea, which exported more than half a million tons to the United States in 2010. The presence of orders and the threat of more trade cases raise serious concerns for US importers and affect their willingness to purchase from potential sources. Again, it appears that Washington trade lawyers have had a greater influence on the availability of pipe in the marketplace than producers, traders, or their customers.